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Building Bridges: State of the Voluntary Carbon Markets 2010

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Building Bridges: State of the Voluntary Carbon Markets 2010 Building Bridges State of the Voluntary Carbon Markets 2010 PREMIER SPONSORS SPONSORS About Ecosystem Marketplace and Bloomberg New Energy Finance Ecosystem Marketplace, a project of the non-profit organization Forest Trends, is a leading source of information on environmental markets and payments for ecosystem services. Our publicly available information sources include annual reports, quantitative market tracking, weekly articles, daily news and newsletters designed for different payments for ecosystem services stakeholders. We believe that by providing solid and trustworthy information on prices, regulation, science and other market-relevant issues, we can help payments for ecosystem services and incentives for reducing pollution become a fundamental part of our economic and environmental systems, helping make the priceless valuable. Ecosystem Marketplace’s work on the voluntary carbon markets is financially supported by the United States Agency for International Development, the David and Lucile Packard Foundation, the Norwegian Agency for Development Cooperation, UKaid from the Department for International Development and the Surdna Foundation. Bloomberg New Energy Finance is the world’s leading independent provider of news, data, research and analysis to decision-makers in renewable energy, carbon markets, energy smart technologies, carbon capture and storage, and nuclear power. The group has staff of more than 130, based in London, Washington D.C., New York, Beijing, New Delhi, Cape Town, São Paulo, Singapore and Sydney. Bloomberg New Energy Finance Insight Services provide deep market analysis to investors in wind, solar, bioenergy, geothermal, carbon capture and storage, energy efficiency and nuclear power. The group also offers dedicated services for each of the major emerging carbon markets: European, Global Kyoto, Australia and the US, where it covers the planned regional markets as well as potential federal initiatives and the voluntary carbon market. Bloomberg New Energy Finance Industry Intelligence provides access to the most comprehensive database of investors and investments in clean energy and carbon. The News and Briefing Service is the leading global news service focusing on clean energy investment. The group also undertakes custom research and runs senior-level networking events. New Energy Finance Limited was acquired by Bloomberg L.P. in December 2009, and its services and products are now owned and distributed by Bloomberg Finance L.P., except that Bloomberg L.P. and its subsidiaries (BLP) distribute these products in Argentina, Bermuda, China, India, Japan and Korea. Bloomberg New Energy Finance Ecosystem Marketplace 731 Lexington Avenue 1050 Potomac St., NW New York, NY 10022 Washington, DC 20007 [email protected] [email protected] www.newcarbonfinance.com www.ecosystemmarketplace.com www.newenergyfinance.com www.forest-trends.org Building Bridges: State of the Voluntary Carbon Markets 2010 A Report by Ecosystem Marketplace & Bloomberg New Energy Finance Katherine Hamilton, Milo Sjardin, Molly Peters-Stanley and Thomas Marcello June 14, 2010 Copyright and Disclaimer: © Bloomberg New Energy Finance is a service of Bloomberg LP, and Ecosystem Marketplace is a project of Forest Trends Association. This document was prepared and based upon information supplied to Bloomberg New Energy Finance and Forest Trends’ Ecosystem Marketplace by participants in a market survey conducted by both parties. Neither Bloomberg New Energy Finance nor Ecosystem Marketplace represents or warrants the accuracy, suitability or content of the survey responses or the results of that survey as set out herein. It is the sole responsibility and obligation of the reader of this report to satisfy himself/herself as to the accuracy, suitability and content of the information contained herein. Bloomberg New Energy Finance and/or Ecosystem Marketplace (such terms taken to also include their respective affiliates, officers, directors, partners and employees) make no warranties and shall have no liability to the reader for any inaccuracy, representation or misrepresentation set out herein. The reader further agrees to hold both Bloomberg New Energy Finance and Ecosystem Marketplace harmless from and against any claims, loss or damage in connection with or arising out of any commercial decisions made on the basis of the information contained herein. The reader of this report is strongly advised not to use the content of this report in isolation, but to take the information contained herein together with other market information and to formulate his/her own views, interpretations and opinions thereon. The reader is strongly advised to seek appropriate legal and professional advice before entering into commercial transactions. Acknowledgments: This report is a compilation of the insights of a wide range of individuals across several continents. It would not be possible without the more than 200 individuals who shared valuable information about their organizations. This report is publicly available due to support from our premier sponsors ERA Ecosystems Restoration Associates and Forest Carbon Group; and sponsors Sustainable Carbon, Baker & McKenzie, Karbone, ORBEO, EcoSecurities and Evolution Markets. The creation of this report has also required insights, time and financial support from dozens of people. They include, Philippe Ambrosi, Evan Ard, Michael Bennett, Izzet Bensusan, Eron Bloomgarden, Neil Braun, Nathan Clark, Erin Craig, Ben Dappen, Ann Espuelas, Robert Falls, Xing’an Ge, Gary Gero, Mary Grady, Katherine Graham, Lenny Hochschild, Lisa Hodes, Eduardo Guardia, Nancy Johnston, Ben Keogh, Alex Langer, Grattan MacGiffin, Brookly McLaughlin, Jenny Sumner, Kelly Moore Brands, Rachel Mountain, Matthew Owen, Nevena Pingarova, Josh Rea, Helen Robinson, Rick Saines, Rishi Seth, Jonathan Shopley, Joanna Silver, Caitlin Sparks, Michael Streck, Iida Tetsunari, Anne Thiel, Gabriel Thoumi, and Martijn Wilder. Thank you also to the staff at Forest Trends Ecosystem Marketplace and Bloomberg New Energy Finance. Cover: Cover page generated by Melissa Tatge Creative. Map images generated by Molly Peters- Stanley, other images iStockPhoto. Executive Summary The year of 2009 was a tumultuous one for the voluntary carbon markets. First, the economic recession had a marked impact on the number of companies offsetting greenhouse gas (GHG) emissions. At the same time, unfolding new climate legislation in the United States led the actors engaged in the voluntary carbon markets to pursue their interest in generating credits viable under new compliance programs despite the markets’ highs and lows. Throughout the year, while voluntary carbon market transaction volumes remained relatively small, the marketplace thrived as an incubator of innovative protocols, registries, alliances, and project types. In the context of the regulated markets, the voluntary carbon markets proved they could be “the size of a mouse but have the roar of a lion.” For example, proposed federal climate legislation in the United States and federal offset programs in Australia referenced standards developed in the voluntary carbon markets. Also, reduced emissions from deforestation (REDD), a project type still exclusive to the voluntary carbon markets, took center stage at the international climate negotiations in Copenhagen at the end of 2009. Last year, many entities engaged in the voluntary carbon markets solely as a warm-up for the compliance big league. However, half the marketplace remains driven by “pure” voluntary buyers seeking to offset emissions. These buyers grew increasingly sophisticated, seeking specific credit types from specific locations. Despite the recession, numerous companies initiated offset programs or continued to commit to offsetting goals. However, the concept of offsetting has not lost its controversial edge, and many stakeholders continued to emphasize the importance of reducing internal emissions before purchasing offsets. Amidst the highs and lows, the marketplace continued to mature at a sprint pace, building infrastructure to ensure accountability and quality, incubating carbon market innovation and developing new GHG emissions reduction projects. Trades Collected from over 200 Suppliers This fourth annual “State of the Voluntary Carbon Markets” report is designed to give a market-wide perspective on trading volumes, credit prices, project types, locations, and the motivations of buyers in this market. Findings are based on data voluntarily reported by 200 offset suppliers, as well as exchanges and registries. Because of the challenges of inventorying and obtaining data from this disaggregated marketplace, numbers presented should be considered conservative. State of the Voluntary Carbon Markets 2010 i | Voluntary Carbon Market Transactions Declined to 94 MtCO2e In 2009, suppliers reported a total volume of 93.7 MtCO2e transacted in the global voluntary carbon markets. Compared to the 126.6 MtCO2e transacted in 2008, volumes declined by 26%, although 2009 market volumes were still 39% above 2007 levels. This drop in volume can be attributed to two major challenges. In response to the global financial crisis, companies cut back on discretionary funding for corporate social responsibility initiatives, including offsetting emissions. At the same time, the prospects for new compliance demand remained uncertain. In the United States, the American Clean Energy and Security Act of 2009 (Waxman-Markey) was approved by the House of Representatives
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